subject: Invoice Factoring - The Best Alternative To Bank Loans [print this page] If you own a middle or small sized business and financing it is becoming a problem in the times of economic crisis, then Invoice Factoring is a great alternative. Financing is very important part of businesses. Its aim is to raise the necessary funds from various sources and then allocate them appropriately. As an increasing number of banks are becoming reluctant in financing businesses, this is gaining popularity. Many factors like cash flow, equity, profitability and years in business prohibit the banks to finance small or middle sized businesses.
How does it work?
The factoring companies are not finance companies. On a contrary to bank loans, the decision to purchase invoices is influenced mainly by the quality and stability of the customer base rather than the financial fundamentals of the company itself. The Invoice Factoring company buys the book debts of the company for a discount. The other company gets the cash within a day by the sale of the account receivable.
Is Invoice Factoring Useful for all kind of Businesses?
This is usually preferred by firms that are focused on growth. Usually, businesses that go for account Factoring are the ones that:
Need improved cash flow to receive discount from suppliers
Have to prepare their inventory for peak seasons
Have to upgrade equipment
Have to produce and sell more goods.
Are New in the Business.
What are the benefits of Invoice Factoring?
There are numerous benefits of this method:
1.Factoring can boost immediate profits and allow production expansion.
2.It can help is increasing the number of clients.
3.If immediate cash is becoming a requirement for paying taxes, factoring can provide you.
4.Additional capital can be attained using factoring.
5.The assets of the company and the ability to pay the loans is not evaluated (which is the prime concern in case o bank loans)
6.No monthly payment obligations.
7.No debt is incurred.
8.The funds can be attained quickly without having to wait for the approval.
9.There is a control on how much one wants to factor.
